Bank credit increased by over Rs 30 billion to Rs 140 billion on November 12, 2005 after increasing by Rs 19 billion to Rs 109.8 billion on November 5. This transpired from monetary and credit profiling released by SBP on November 24.
Both private sector and government sector contributed to the expansion - the former increasing by about Rs 15 billion to Rs 120 billion and the latter increasing by Rs 13 billion to Rs 60 billion. Expansion of about Rs 3 billion also occurred on account of other items, which along with PSEs and SBP Credit to NBFIs, were largely contractionary in the last week. As overall expansionary impact of domestic bank credit was neutralised by a draw down of foreign reserves/assets of the banking system in the amount of some Rs 9 billion, increase in money supply during week was limited to Rs 21.5 billion reaching Rs 54.7 billion as on November 12.
Break-up of money supply revealed that entire expansion during the week occurred on account of deposit money (up Rs 22 billion) while currency in circulation declined marginally (down Rs 0.5 billion).
Head wise details of components of deposit money showed that during the week, demand deposits improved by Rs 20.8 billion [from (-) Rs 49.2 billion to (-) Rs 28.4 billion] and time deposits by Rs 1.1 billion [from (-) Rs 4.3 billion to (-) Rs 3.2 billion]. Overall increase in money supply during the year to November 12 was shared by increase in currency in circulation in the amount of Rs 89.3 billion partly offset by decline in deposit money amounting to Rs 34.6 billion represented by declines of Rs 28.4 billion in demand deposits and Rs 3.2 billion each in time deposits and RFCDS.
Expansion of Rs 120 billion in private sector credit was spearheaded by commercial banks which provided well over 99 percent of incremental credit during the week while specialised banks were responsible for just 0.7 percent of it. Position of bank credit to PSEs and SBP credit to NBFIs remained almost unchanged during the week under report.
In the corresponding period last year (July 01 - November 13, 2004), private sector had increased by a little over Rs 140 billion with commercial banks providing about 98.6 percent of it. It emerges, therefore, that increase in private sector in FY06 so far was still lower by Rs 20 billion compared with the level attained in the corresponding period last year.
The second largest expansion of Rs 60.2 billion in domestic credit was government borrowing explained by budgetary borrowing (up Rs 77 billion) and commodity operations and other borrowing (down Rs 15.6 billion and Rs 1.2 billion respectively).
Distribution of budgetary borrowing as between federal government and provincial governments revealed that federal government represented 88.5 percent [or Rs 68.2 billion with Rs 113.8 billion borrowed from the State Bank and (-) Rs 45.7 billion from the scheduled banks] of it and Provincial governments the remaining 11.5 percent [or Rs 8.8 billion with Rs 2.3 billion borrowed from the State Bank and Rs 6.5 billion from the scheduled banks].
Position of government deposits, which are adjusted from gross budgetary borrowings to arrive at the net budgetary borrowing, showed that federal government's deposits with State Bank improved by Rs 18.8 billion while those with scheduled banks improved by Rs 19 billion over their respective levels as on June 30, 2005.
On the other hand, provincial governments' deposits with the State Bank increased by Rs 1.7 billion while their level with scheduled banks declined by Rs 6.6 billion for the same period. Government's gross indebtedness to State Bank increased by Rs 116 billion (Federal Government Rs 113.8 billion, Provincial Governments Rs 2.3 billion).
Government's gross indebtedness to scheduled banks, on the other hand, showed net retirement of Rs 39 billion [Federal Government (-) Rs 45.7 billion, Provincial Governments Rs 6.3 billion].
Liquid foreign exchange reserves, which of late has been declining week in and week out, and stood at 11,544.6 million dollar on November 12 declined further to stand at 11,525.0 million dollar (8,934.6 million dollar with SBP and 2,590.4 million dollar with scheduled banks) on November 19 as per the latest update of SBP.
The rupee-dollar parity remained largely unchanged during the week ended on November 12, 2005. The rupee closed at Rs 59.75 and Rs 59.77 per dollar in the inter-bank market and at Rs 59.75 and Rs 59.85 per dollar in the open market for buying and selling, respectively. The rupee also posted gains against the Euro and closed on the weekend at Rs 69.65 and Rs 69.75 per Euro for buying and selling respectively.
(Comments and Suggestions: research.dept@aaj.tv)